What is Moody's?


Moody’s Investors Service is a credit ranking agency that offers Insurance Financial Strength Ratings, which inform Policygenius’ best company recommendations.

Rebecca Shoenthal author photoAmanda Shih author photo


Rebecca Shoenthal

Rebecca Shoenthal

Licensed Insurance Expert

Rebecca Shoenthal is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Previously, she worked as a nonfiction book editor. She has a B.A. in Media and Journalism from the University of North Carolina at Chapel Hill.


Amanda Shih

Amanda Shih

Editor & Licensed Insurance Expert

Amanda Shih is an insurance editor and licensed Life, Health, and Disability agent at Policygenius in New York City. Her work has appeared in Slate, Lifehacker, Little Spoon, and J.D. Power.

Updated April 30, 2021|2 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our

editorial standards

and how we make money.

At Policygenius, we use several factors—including third-party rating groups—to determine our best life insurance company recommendations. Moody’s Investors Service, founded in 1909, provides ratings and reviews of Insurance Financial Strength, the ability of insurance companies to repay claims. 

Here’s how Moody’s ratings work and how you can use them to choose your life insurance provider.

Key Takeaways

  • Moody’s rates companies’ financial strength based on their ability to repay short and long-term debts

  • Short-term ratings range from P-1 to NP (best to worst) and Aaa to C for long-term ratings

  • Policygenius uses Moody’s ratings to inform our editorially independent reviews of life insurance companies

What does Moody’s do and why do their ratings matter?

Along with Standard & Poor’s and Fitch Group, Moody’s is among the largest credit ratings agencies in the world. Moody’s is a respected source for analysis of the financial strength of banks, money markets, bond funds, and insurance companies, and among those that the U.S. government uses for regulatory purposes.

Moody’s ratings help investors—and anyone trusting a life insurer with their family’s financial protection—judge the stability and creditworthiness of financial institutions.

Why is a life insurance company’s Moody’s rating important?

Once you’ve determined the type of life insurance policy you need and compared premiums, it can be difficult to decipher which insurer is best for you. Choosing a financially stable provider ensures that your family will receive a death benefit after you’re gone. 

Moody’s weighs the outstanding debts and other financial risks of national life insurance companies and rates them according to a detailed creditworthiness scale. A company’s Moody’s ratings and other third-party credit ratings can help you confirm an insurer’s financial reliability.

How does Moody’s rating scale work?

Moody’s uses a multi-pronged rating system to determine an insurer’s financial strength. The ratings process includes four steps:

  1. A company applies for a rating and Moody’s assigns an analytical team to the company

  2. The company’s management presents company information to Moody’s analytical team 

  3. Analytical team submits proposed rating to committee for a review and approval vote to ensure integrity and consistency

  4. Rating is shared with the company and in a press release by Moody’s

For insurance companies, the ratings review accounts for a provider’s short- and long-term financial risk.

Ready to shop for life insurance?

Start calculator

Moody’s short-term rating scale

Moody’s short-term ratings are based on an insurance company’s capacity to repay its short-term debt obligations. Moody’s defines short-term debts as obligations due for repayment in under one year.

Moody's designationAbility to repay short-term debts 
P-1                Prime-1: superior                  
P-2                Prime-2: strong                    
P-3                Prime-3: acceptable                
NP                 Not Prime                          

Moody’s long-term rating scale

Moody’s long-term ratings are based on an insurance company’s credit risk of fixed-income obligations. The ratings reflect the possibility that a life insurance benefit payout will not be honored as promised.

Moody's designationAbility to repay long-term obligations                                                                         
Aaa                Highest quality, minimal risk                                                                                  
Aa                 High quality, very low credit risk                                                                             
A                  Upper-medium-grade, subject to low credit risk                                                                 
Baa                Medium-grade, moderate credit risk, may possess speculative elements                                           
Ba                 Substantial credit risk, with speculative elements                                                             
B                  High credit risk, considered speculative                                                                       
Caa                Very high credit risk, poor standing                                                                           
Ca                 In or very near default, highly speculative, some prospect of recovery in principal and interest                
C                  Typically in default, with little prospect for recovery of principal and interest 

Long-term ratings may come with a 1, 2, or 3 added to the letter rating, which indicates how highly within its letter category a company ranks. A company rated Baa1 is less risky than one rated Baa3.

Ready to shop for life insurance?

Start calculator

How Policygenius uses Moody’s

Policygenius takes a comprehensive approach to determine the best life insurance companies available. We don't get paid for reviews and evaluate an extensive rubric of criteria to come up with robust, unbiased reviews to match you with the right life insurance company.

Moody’s ratings factor into our Confidence category: consumer confidence based on scores from major financial rating institutions. We normalize ratings from Moody’s, Standard & Poor’s, and A.M. Best, to give companies a score out of 10.

To learn more, you can compare our life insurance company reviews or read our complete ratings methodology.

Moody's Ratings FAQs

What is Moody’s ratings scale?

Moody’s ratings scale for life insurance companies ranges from P-1 to NP (best to worst) for short-term debts and Aaa to C for long-term debts.

How does Moody’s set its ratings?

An analytical team assesses a company’s creditworthiness and assigns a rating, which is approved by a review committee to ensure integrity and consistency across ratings.

How can a Moody’s rating help me choose a life insurance company?

Moody’s ratings indicate how much you can trust a company to pay its debts—like the payout on your life insurance policy. Choosing a financially stable insurer can provide peace of mind that your family will receive the financial protection you paid for.

More about

Life Insurance

SBLI Life Insurance Review

SBLI offers accelerated underwriting, which allows qualified applicants to skip the medical exam and receive a policy decision in as little as a week.

Read more

What is A.M. Best?

A.M. Best is a credit rating agency that rates insurance companies’ ability to meet their financial commitments to customers.

Read more

What is the Better Business Bureau (BBB)?

The BBB rates life insurance companies based on customer satisfaction and trustworthiness, which informs Policygenius’ best company recommendations.

Read more